Which one of the following statements is the most correct? A) If central banks are not sterilizing and the home country has a balance of payments surplus, any associated increase in the home central bank’s foreign asset implies an increased home money supply. B) If central banks are not sterilizing and the home country has […]
Refer to the above table. Suppose the U.S. government (but not Europe) offers a $10 million subsidy? What will be an ideal response? ANSWER In this case Airbus would decide not to enter the market since it knows Boeing will, and that therefore its own production will entail a loss of $5 million.
The concept of “economic pessimism” stems from A) the theory and empirical fact which states that developing nations face declining export prices relative to increasing import prices. B) the fact that economic growth in an era of globalization is difficult to attain. C) the fact that smaller countries would not enjoy comparative advantage unless they […]
The LM curve will shift to the right when government expenditures increase. Indicate whether the statement is true or false ANSWER FALSE
A foreign exchange swap A) is a spot sale of a currency. B) is a forward repurchase of the currency. C) is a spot sale of a currency combined with a forward repurchase of the currency. D) is a spot sale of a currency combined with a forward sale of the currency. E) make up […]
Refer to above figure. While selling exports it would also maximize its domestic sales by equating its marginal (opportunity) cost to its marginal revenue of $5. How much steel would the firm sell domestically, and at what price? What will be an ideal response? ANSWER 4 million tons at $10/ton.
The consensus today is that import-substitution protectionist industrial policy has not served the developing countries’ growth ambitions well. This fact proves that policies relying on export-driven growth are the “winning ticket” for these countries. ANSWER Although there are many who draw precisely this lesson from the ” East Asian Miracle” of the past half-century, […]
Statistical evidence suggests that A) free trade policies promote economic growth more effectively than do import substitution policies. B) import substituting policies tend to promote effective exploitation of scale economies. C) import substitution tends to lead to relatively low effective rates of protection. D) import substitution is to this day the preferred growth strategy promoted […]
The terms of trade (TOT) is defined as A) (index of export prices)/(index of import prices). B) (home-country currency)/(foreign-country currency). C) . D) E) having a competitive advantage over other nations. ANSWER A
Under the monetary approach to exchange rate theory, money supply growth at a constant rate A) eventually results in ongoing price level deflation at the same rate, but changes in this long-run deflation rate do not affect the full-employment output level or the long-run relative prices of goods and services. B) eventually results in ongoing […]
